Govt may face challenge over cost in sugarcane floor price

As the National Democratic Alliance government gets down to fulfil its poll promises, it might find it difficult to provide a floor support price of 50 per cent over the cost of production, at least in sugarcane.

Officials said state governments in their estimates of production cost for sugarcane for the 2015-16 season (October to September) have quoted a rate on which 50 per cent addition would mean over Rs 400 a quintal of the Fair and Remunerative Price (FRP, the equivalent of minimum support price in sugarcane). They said for the 2015-16 sugar season, Uttar Pradesh has reportedly estimated the cost of production at Rs 281 a quintal, while Haryana pegged it at Rs 327. If 50 per cent is added on to the cost of production, then FRP should be around Rs 420 a quintal.

"Guaranteeing an FRP of over Rs 400 for 2015-16 is almost next to impossible as sugar prices in retail markets would be close to Rs 100 a kg," said an official, who participated in the meeting.

The issue of cost of production of sugarcane was discussed in a meeting on Monday between the Commission for Agricultural Costs and Prices (CACP) and all stakeholders of the sugar industry for fixing the FRP for 2015-16 sugar season. The stakeholders also decided to expedite the ethanol-blending programme.

FRP is the benchmark rate set by the Centre, while state governments are free to fix their own State Advised Price or SAP which is followed by the companies while making payment to farmers. For the 2014-15 season, CACP has already announced an FRP of Rs 220 a quintal, only 4.76 per cent more than the previous year.